India's big domestic retailers face endurance test

NEW YORK: Far from opening its vast retail market to foreign investors, India is looking at how to prevent large domestic players from displacing mom and pop stores a sensitive issue in a market dominated by unorganised retailers.

"It is not about allowing FDI, the issue is that of large versus small retailers," Commerce and Industry Minister Kamal Nath said at the first 'Pravasi Bharatiya Divas New York 2007', last evening while replying to a question on when India would open up its over $330-billion retail market to foreign investments.

His comments ring the alarm bells for Indian corporate retail players, who are already being shackled across states. Last month, the Uttar Pradesh government ordered the closure of corporate-run food retail stores citing law and order problems, while Kerala has not permitted opening of western-style food retail stores in the state.

Asked if this meant large retailers would have to be prepared to close shop anytime the government feels like, Nath said, "That is not under my ministry. Ask the Consumer Affairs Ministry."

While this is so, India oddly ranked World No.1 in the AT Kearney Global Retail Index 2006. Organised retailers account for roughly 3 per cent of the retail market, with the rest made up of mom and pop outlets and neighbourhood 'kirana' (grocery) stores.

He said the government wants to promote only incremental growth in the retail sector, but did not elaborate how it would find out the number of small retailers that have been displaced by big corporates.